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Case 9 - 4 7 ( Algo ) Comprehensive Master Budget; Short - Term Financing; Acquisition of Robotic The predetermined overhead rate is $ 1
Case Algo Comprehensive Master Budget; ShortTerm Financing; Acquisition of Robotic The predetermined overhead rate is $ per directlabor hour. The following production overhead costs are budgeted
for
All of these costs will be paid in cash during the quarter incurred except for the depreciation charges.
FrameIt's quarterly selling and administrative expenses are $ paid in cash.
Jackson anticipates that dividends of $ will be declared and paid in cash each quarter.
Framelts projected balance sheet as of December x follows: Prepare a budgeted schedule of cost of goods manufactured and sold for the year Hint In the budget, actual and applied
overhead will be equal.
Answer is not complete.
Equipment LO
The following information applies to the questions displayed below.
Jeffrey Vaughn, president of FrameIt Company, was just concluding a budget meeting with his senior staff. It was
ahead and purchase the industrial robot we've been talking about. We'll make the acquisition on January of next year,
and I expect it will take most of the year to train the personnel and reorganize the production process to take full
advantage of the new equipment."
In response to a question about financing the acquisition, Vaughn replied as follows: "The robot will cost $ We'll
finance it with a oneyear $ loan from Shark Bank and Trust Company. I've negotiated a repayment schedule of
four equal installments on the last day of each quarter. The interest rate will be percent, and interest payments will be
quarterly as well." With that the meeting broke up and the budget process was on
FrameIt Company is a manufacturer of metal picture frames. The firm's two product lines are designated as S small
frames; inches and L large frames; inches The primary raw materials are flexible metal strips and inch by
inch glass sheets. Each S frame requires a foot metal strip; an frame requires a foot strip. Allowing for normal
breakage and scrap glass, Framelt can get either four frames or two frames out of a glass sheet. Other raw materials,
such as cardboard backing, are insignificant in cost and are treated as indirect materials. LaKendra Jackson, Framelts
controller, is in charge of preparing the master budget for She has gathered the following information:
Sales in the fourth quarter of are expected to be frames and frames. The sales manager
predicts that over the next two years, sales in each product line will grow by units each quarter over the previous
quarter. For example, S frame sales in the first quarter of are expected to be units.
Framelts sales history indicates that percent of all sales are on credit, with the remainder of the sales in cash. The
company's collection experience shows that percent of the credit sales are collected during the quarter in which the
sale is made, while the remaining percent is collected in the following quarter. For simplicity, assume the company is
able to collect percent of its accounts receivable.
The frame sells for $ and the frame sells for $ These prices are expected to hold constant throughout
Framelts production manager attempts to end each quarter with enough finishedgoods inventory in each product line
to cover percent of the following quarter's sales. Moreover, an attempt is made to end each quarter with percent
of the glass sheets needed for the following quarter's production. Because metal strips are purchased locally, Framelt
buys them on a justintime basis; inventory is negligible.
All of FrameIt's directmaterial purchases are made on account, and percent of each quarter's purchases are paid in
cash during the same quarter as the purchase. The other percent is paid in the next quarter.
Indirect materials are purchased as needed and paid for in cash. Workinprocess inventory is negligible.
Projected production costs in are as follows:
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